Alcoa 2013 Annual Report Download - page 5

further increasing payloads without any loss of fuel efficiency. Thanks
to that steady stream of innovations, Alcoa wheels has had a 15%
annual revenue growth rate since 2009 and is now expanding into the
high growth markets of China and Brazil.
Innovation drove the phenomenal growth of Alcoa’s aerospace
business since the days of the Wright brothers. 90% of all aerospace
alloys on aircraft currently in service were developed by Alcoa. Today,
every Western commercial aircraft uses Alcoa fasteners and every
Western commercial and military aircraft engine is built with Alcoa
nickel super-alloy investment castings. With $4 billion of annual
revenues from the aerospace sector, 60% from non-aluminum metals,
Alcoa is the global leader in aerospace fasteners and jet engine airfoils.
Our advanced metallurgical technology allows jet engines to operate at
temperatures of more than 3,000º Fahrenheit, a key factor in achieving
the industry’s goal of 50% emissions reductions and a 15% reduction
in both fuel burn and decibel noise. Our advances in Aluminum-
Lithium have enabled airlines to dramatically reduce their operating
and maintenance costs by increasing fuel efficiency and improving
resistance to corrosion and fatigue.
The beautiful cauldron holding the Olympic flame above the Sochi
Winter Games was touted by the Russian hosts as a symbol of an
environmentally-friendly Olympics. Built with panels made from
Alcoa’s architectural aluminum, it is also a symbol of Alcoa innovation
and the bright future for Alcoa’s $1.5 billion commercial construction
businesses. The Alcoa Reynobond® panels in the cauldron were
coated with an innovative technology called EcoClean™ that is
self-cleaning and removes pollutants from the air. In addition to
aesthetic and emissions benefits, Alcoa’s new aluminum architectural
systems provide buildings with stronger impact protection and more
than 50% better thermal performance than traditional methods.
As governments and customers seek to reduce the high energy
consumption and resultant emissions of buildings, Alcoa’s “green
building” innovations enabled Alcoa to grow our business during
the construction drought of the past five years and position us for
dramatic growth when the commercial real estate market rebounds.
To win the business to build the cauldron and other venues in Sochi,
our building and construction team leveraged the strong relationships
of Alcoa’s Global Rolled Products businesses in Russia. Similarly,
our Global Rolled Products team built on our longstanding Global
Primary Products presence in Brazil to expand its packaging business
in Latin America. In Saudi Arabia, where our Ma’aden-Alcoa joint
venture will complete construction in 2014 of the largest integrated
aluminum complex in the world, the joint venture will be a base for
all three of Alcoa’s global groups to reach the growing Middle East
market. As the world’s lowest cost aluminum production facility, the
Ma’aden-Alcoa joint venture is integral to our strategy for increasing
the cost competitiveness of our commodity portfolio, the alumina and
aluminum businesses.
Our alumina business remains profitable today because we have
reduced the production costs in our refineries to be in the bottom
27% of the global cost curve and because we have decreased the
impact of the LME on Alcoa, where financial traders have become
an ever increasing part of the market, contributing to volatility and
pricing that is delinked from the fundamentals of the aluminum
market. In 2013, 55% of our third-party alumina shipments were
based on the Alumina Price Index (API) or spot pricing, which are
driven by true alumina demand and supply market forces. To increase
the profitability of our aluminum business, we are increasing the
productivity of our smelters and closing or curtailing those high on the
cost curve due to high energy prices or inefficient technology. By the
end of 2013, we had permanently closed 829,000 metric tons since
the beginning of 2008 and curtailed another 655,000 metric tons of
uneconomic aluminum capacity towards our goal of being the most
profitable and technologically advanced aluminum producer.
During 2013, we also resolved a number of legacy matters from
earlier years, including the conclusion of investigations by the U.S.
Department of Justice (DOJ) and Securities and Exchange Commission
(SEC) related to allegations of bribery in securing certain alumina
contracts originally signed many years ago with a Bahraini company
called Alba. In connection with the resolution of this legal matter, both the
DOJ and the SEC recognized Alcoa for our cooperation throughout their
investigations and for our compliance efforts, including comprehensive
reviews and enhancements to our programs.
We continued to reaffirm Alcoa’s Values during 2013. We launched
a global Integrity Champion Network of high potential managers to
further embed a values-based culture of integrity and compliance at
all levels of the Company. Our employees’ strong commitment to our
Environment, Health and Safety Value resulted in Alcoa’s first fatality-
free year in the 70 years since the Company began monitoring safety
on a global basis. In support of the diversity aspect of our Respect
Value, Alcoa won the 2013 Catalyst Award for providing opportunities
to women worldwide and was chosen as the Best Company for
Women in Brazil.
Alcoa’s 125th anniversary year was an important transition point in
the continuing success story of our great Company. We resolved past
legacy matters, reaffirmed our enduring Values, and accelerated our
transformation from a commodity company to growth businesses
providing our customers value-creating technologies and solutions.
Continuing to build on our founders’ innovation heritage and sound
business principles, we are well-prepared and fully committed to
achieve the Alcoa vision—“Advancing each generation”—for our
shareholders, customers, employees, communities and partners.
Klaus Kleinfeld
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
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